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CBN lowered its benchmark rate by 3.5 percentage points to 23%.
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Commercial loan rates will not automatically fall by the same amount.
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Even where banks reduce rates, delayed payments can erase the savings.
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Businesses need to examine borrowing costs alongside customer payment terms.
September 24, (THEWILL) – The Central Bank of Nigeria’s reduction of its benchmark rate from 26.5% to 23% offers businesses a reason to watch for cheaper credit.
But a supplier could eventually secure a lower bank rate and still pay more to finance the same order because a customer takes longer to settle the invoice.
Announcing the September 22 decision, Governor Olayemi Cardoso described it as a recalibration of monetary policy rather than a shift away from the bank’s restrictive stance. An equivalent reduction in commercial lending rates is therefore not guaranteed.
Even if lenders pass on the full 3.5-percentage-point reduction, businesses have another condition to meet before the savings reach their accounts. They must avoid keeping the money borrowed for so much longer that additional interest consumes the benefit.
Your Customer Can Cancel Out a Cheaper Loan
A supplier often pays for materials, transport and labour before receiving payment. When borrowing covers those expenses, delivering the order does not necessarily end the financing cost. Interest can continue accumulating while the customer uses the goods and the supplier waits for payment.
The British Business Bank identifies inventory funding and late payments as pressures on working capital. For a business carrying interest-bearing debt, that waiting period has a measurable price.
Consider a hypothetical supplier borrowing ₦10 million at 30% annual simple interest, with the entire balance outstanding until payment arrives.
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Over 90 days, interest would reach approximately ₦739,726. Suppose the lender reduced its rate to 26.5%, matching the size of the CBN adjustment. The bill would fall to ₦653,425, saving about ₦86,301.
However, if the customer paid after 120 days, interest at the lower rate would reach ₦871,233. The supplier would spend approximately ₦131,507 more than under the original rate with payment after 90 days.
This is an illustration, not a prediction of bank pricing. It uses principal multiplied by the annual rate and days borrowed, divided by 365, excluding fees, penalties and compounding.
Payment Terms Belong Beside the Interest Rate
For that same supplier, receiving payment after 60 days at the original 30% rate would reduce interest to approximately ₦493,151. Shortening the wait would save more than the assumed rate reduction with payment after 90 days.
Businesses reviewing their financing after the CBN decision should therefore examine when customer payment becomes due. A 60-day term counted from invoice approval can mean a much longer wait from the date materials were purchased, or work began.
Deposits, milestone payments and prices that account for extended credit can reduce this exposure, although smaller suppliers may have limited bargaining power. Discounts offered for early payment also need to cost less than the financing they save.
Earlier collection only reduces interest where the borrowing agreement allows it. Fixed charges, minimum interest periods and early-repayment fees can affect the calculation.
CBN’s decision may eventually make a naira of borrowing cheaper. For a supplier waiting on an unpaid invoice, the customer still helps determine how many days that naira must remain borrowed.
Joy Onuorah is a business journalist and brand communications specialist covering financial markets, artificial intelligence, digital economy, and the ideas reshaping business across Africa and the global market. Beyond her reporting for TheWill, Joy uses brand strategy, storytelling, copywriting, and high-value SEO to help brands build lasting market authority.
